Are you worried that you’ve left it too late to plan for your retirement? Don’t worry – a lot of people overlook their retirement planning in the general rush of daily life. If you haven’t already started thinking about your retirement income, here are some things you can do now to ensure a comfortable lifestyle later on.
First – crunch the numbers
Many of us, particularly those who were already working when superannuation funds were established around 1992, don’t have a lot of superannuation. Alternatively, we may not know how much we will have to live on once we retire – and are too scared to find out.
The biggest mistake many people make with their retirement is not knowing their numbers. Once you do, you will be surprised at how a few tweaks now will make a difference later on, thanks to compound interest.
The first thing to work out is when you can retire, and that is straightforward. While there is no ‘official’ retirement age in Australia, there is what’s called a ‘preservation age,’ which is the age at which you can access your super. For anyone born after 30 June 1964, it’s 60 years of age. People born earlier can access it at a younger age – you can check your preservation age here.
You also need to know your qualifying age for the Age Pension, which is currently between 65 and 67 years. The best place to check this is the Australian government website.
How much money will I have to live on?
This figure will depend on several factors. How far you are away from retirement, how much you are adding to your super fund, and the lifestyle changes you make in the run-up to retirement will all make a big difference here.
This handy calculator from Money Smart, a reliable government website, provides you with different options depending on when you plan to stop working and how much you are earning. Tap in your age, your current super balance, your income and your preferred age to retire, and you’ll be told how much your annual income of super plus the Age Pension will be. Play around with the figures; for example, by boosting your income or pushing back your retirement age, to get a better idea of how you can maximise your retirement pot. And remember, you can continue to work for as long as you feel comfortable, to supplement your income and your super, for as long as you like and are able.
Some questions to ask yourself
Once you have a general idea of when you can retire and how much super you currently have you may feel motivated to make a few changes to either boost your funds or reduce your outgoings. Here are some things to look at:
- What is my weekly and monthly budget right now, and will that change? Are there any outgoings I can reduce?
- Can I add any more to my super, either by earning more or saving more? Even adding another 10% a year on top of your employer contributions will make a difference to your retirement. Read our article on transitioning to retirement for more information.
- Do I have any debt to clear, such as credit cards and personal loans?
- If I have a car loan, could I get a smaller car and pay that off now?
- How conservative are my investments, and am I getting the best out of them? (Your investments should ideally become more conservative the closer you get to retirement, to safeguard against big losses of capital.)
- Do I need to think about downsizing at some point to reduce or clear my mortgage, and if so, where would I like to live next?
- What will I be entitled to from the government? The Age Pension? A seniors concession for public transport and medication?
- Do I have a plan for home care or moving into aged care, and is my family covered?
- Will I keep working after retirement to supplement my income?
Do your retirement research and talk to the experts
One great source of reassuring retirement advice is Scott Pape, also known as The Barefoot Investor. His bestselling money guide is geared towards everyday Australians looking for sound financial advice and a secure retirement plan.
Additionally, many super funds offer retirement planning services. Or you can chat to a financial adviser about changes you can make now to improve your financial situation.
Note: This article is general advice only and doesn’t take into account your unique circumstances. You should always seek personalised advice when planning your retirement.
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